The Federal Board of Revenue (FBR) will grant income tax exemption on interest payment to ICBC bank of China regarding coal-fired energy projects, subject to agreement and signing of third protocol between Pakistan and China under avoidance of double taxation treaty. Sources told Business Recorder here on Friday that the issue of income tax exemption on interest payment to Chinese banks was discussed at a meeting held at the FBR House to facilitate China-Pakistan Economic Corridor (CPEC) projects.
The issue is related to the exemption of income tax on interest payment to ICBC and other Chinese commercial banks. The FBR said that exemption of income tax on interest payment to ICBC in respect of financing in CPEC energy projects is in the process of negotiations with the State Administration of Taxation (SAT) China. Two rounds of talks have been held between Pakistan and China but no agreement has been reached so far. As per approval from the Prime Minister, exemption will be granted on interest payment to ICBC in respect of coal-fired energy projects, subject to agreement and signing of third protocol between Pakistan and China.
It has been decided that necessary action would be initiated for change in policy as well as law through Finance Bill or the ECC meeting, whichever is feasible to facilitate (CPEC) projects. Sources said that the Federal Board of Revenue (FBR) has expressed its inability to issue statutory regulatory order (SRO) for giving legal cover to fiscal incentives granted under transmission policy for Transmission Line Projects, as any change in law will only be made through parliament or Economic Co-ordination Committee (ECC) of the Cabinet. Private Power Infrastructure Board (PPIB) requested FBR for issuance of SRO to give legal cover for fiscal incentives granted under transmission policy which have not been implemented so far. The FBR responded that the Board no more enjoys powers to issue SRO and any change in law will be made through parliament or ECC. On the request of Ministry of Water and Power, a meeting was held in FBR to discuss and facilitate CPEC project companies. The FBR expressed the commitment and resolve to facilitate the energy corridor projects.